Many lawyers have some type of ownership/equity interest in or with the clients they serve. Others serve on local nonprofit boards within their community. All do so usually without completely understanding how these outside interests and relationships affect their professional liability insurance coverage.
Most lawyers professional liability policies exclude coverage for those professional services that lawyers provide to clients where the lawyer has an ownership interest in or with that client. Some policies go so far as to include ownership interests of the lawyer’s spouse! Common examples that I have seen on lawyer applications are: ownership in title agencies, real estate, and small businesses of all kinds.
LPL Polices also exclude the acts of the lawyer when acting as a director, officer or board member of entities, including nonprofits. Lawyers are often asked to sit on boards because they ARE Lawyers and are tapped for their knowledge of the law during board meetings. It is very difficult for the lawyer and the board to distinguish when the lawyer is acting as a board member and when and if the lawyer is acting in the capacity of a lawyer and lawyer client relationship. It is easy for the lawyer to get caught in a situation where the board believes he/she provided legal advice however the lawyer believes that he/she provided that advice as a member of the board. In the event that “advice” leads to a bad outcome for the board and eventually ends in a malpractice claim, the lawyer could be without coverage!
Before accepting board positions or investing with or in clients, all lawyers should ask how this relationship will impact the professional liability insurance from both a coverage and cost standpoint.
When insureds report a claim to their carrier, the expectation is the claim will be covered and their assets and reputation be protected. While this happens the majority of the time, there are situations when the worst occurs and the claim is denied coverage. There are several reasons insurance carriers decline coverage on reported professional liability claims. One of the reasons claims are denied is due to the late reporting of the claim. Although late reporting is a cause for claim denial, it can be avoided by the insured.
Professional liability insurance policies require that all claims be reported in the policy period that the insured first becomes aware of the claim. This is also true for potential claims. Most carriers have wording in the policy that states the insured needs to report those incidents that the insured could reasonably foresee the incident may lead to claim. Failure to report these potential claims may lead to a denial in coverage.
It sounds easy and it should be easy for the firm to report claims and potential claims as soon as they are aware of them. Unfortunately, it is never easy. No firm wants to “think” they made a mistake or a client is unhappy with their services. In addition, some insureds think that the mere reporting of a claim or potential claim will increase their insurance premium, so the claim goes unreported. Not true. The mere reporting of a single claim or potential claim does not necessarily increase your premium.
Bottom line…you pay a lot of money to secure the policy, don’t jeopardize the coverage when you need it most. Report issues early. Perhaps the tips below will help you make sure your claim or potential claim is reported in a timely fashion:
- Meet monthly with your staff/lawyers to review the “tough” cases.
- Encourage your staff/lawyers to bring problem cases to your attention. Don’t punish.
- At renewal time, ask all lawyers in the firm to answer the potential claim and claim question on the renewal application. Have them sign and date it.
- Most carriers now have a claim hot line or help line that is available to insureds. Use it.
- Make sure that your staff/lawyers know how the insurance policy works and that claims and potential claims need to be reported immediately or they risk losing coverage. Identify a point “claims person.” Have all claims and potential claims directed to that person for review and reporting.
Don’t give informal legal advice to friends or family.
Don’t give informal legal advice to friends or family. It can be tempting at a party or family event, but it could be harmful to both yourself and the receiver of the advice. Your advice, given casually, may be less well thought-out than usual, or not backed by needed research. Also, you could be creating a conflicts issue for yourself by giving advice to a person who has not been through a conflicts of interest check first.
Tip courtesy of www.attorneyprotective.com
Be careful online.
Unfair or not, lawyers have to be more careful than the average person when posting online. Don’t be casual. Don’t post anything about a specific legal matter or client. Include disclaimers. Remember that the Model Rules of Professional Conduct apply to your actions online.
Tip courtesy of www.attorneyprotective.com
Avoid fee disputes.
Avoid fee disputes by explaining the fee arrangement in great detail during the first meeting. Confirm this understanding in writing and have the client agree by signing the agreement. When billing the client, ensure there is enough detail in the bill to allow the client to understand everything you are doing on their behalf. Use simple terminology and avoid abbreviations to make sure the bill is easily understood.
Tip courtesy of www.attorneyprotective.com
Most professionals know to protect themselves and their clients with the purchase of a professional liability insurance policy, commonly referred to as an E&O policy. What most professionals don’t know or don’t care to know, is when and how to properly report a claim or potential claim to their insurance carrier.
Initially, the most important issue when reporting a claim is the timing of the notice to the carrier. All carriers have different reporting requirements but most state that the claim or potential claim must be reported to the carrier in the policy period YOU first become aware of the claim or potential claim. Some carriers are even more restrictive and will use the term “immediately report” or “as soon as possible after first becoming aware of the claim.” No matter the wording in the policy, the timing of the notice to the carrier is absolutely vital to the claim being covered under the policy. A delay in reporting the claim or potential claim to the carrier can lead to a declination of coverage due to “late reporting.” Late reporting is a term no insured wants to hear in a claim situation. Do not fall into the trap of thinking it will just go away, or hold off on reporting for fear that your premium will increase. Providing professional services for others unfortunately will give rise to a claim or potential claim. These must be dealt with immediately.
All carriers have slightly different policy wording with regard to the timing of claim reporting. The best way to reduce the possibility of a declination due to late reporting is to report the claim as soon as you first become aware of the claim or potential claim. Regardless of “how much time” the policy provides, immediate reporting of the issue to the carrier will be viewed as favorable by the carrier and the claims personnel. It may even provide a good night sleep for you!
The other day I was speaking with an attorney who had an interest in our Professional Liability Insurance programs. So to start the process, I asked him questions regarding his current coverage. Keep in mind, they were not tough questions: Who is his carrier? Who is his agent? What are his limits and deductible? When is his renewal date? All of these questions solicited the same response, “I’m not really sure”. As crazy as that may sound, his next answer really took me by surprise. When asked if I could review his current policy, he had no idea where his policy was or how to get a copy. He actually asked me if I could get him a copy of his policy!
I realize that professionals are very busy people and insurance (for some) is considered BORING, but you spend a lot of money for this coverage. You should at least take the time to know some of the basic details (at the very least, where your policy is kept). If you do nothing else, take the time to read your policy once a year. It shouldn’t take that long to read it and will be time well spent. Some things to pay attention to are the obvious: carrier name, policy period, limits of liability and deductible. Be sure to take note of any retroactive dates that apply as well as the definition of claim, the definition of insured and any and all exclusions. You may find out that things you thought were covered aren’t and vice versa. Bottom line is take the time to read your policy. Know what you are paying for.
And, remember, you can always ask your agent to explain things that you don’t understand.